Quicksilver Resources (NYSE:KWK) will continue development of its core properties in the Barnett Shale in 2011, while also working during the year to evaluate exploratory basins in the western part of the United States and Canada.
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2011 Capital Expenditures
Quicksilver Resources plans to spend $455 million in capital in 2011, with $280 million devoted to drilling and completion of wells and another $50 million for further lease acquisition. In 2010, Quicksilver Resources spent $588 million in capital, with approximately $453 million, or 77%, dedicated toward drilling and completion activities.
Despite the drop in spending from 2010, Quicksilver Resources expects to grow production by 20% in 2011, more than double the 9% production growth achieved in 2010. One reason that may explain why production growth was lower in 2010 is that the company has 121 wells in its largest play that have been drilled and are awaiting completion.
Quicksilver Resources has 163,000 net acres under lease in the Barnett Shale in Texas, and despite the effort to diversify to other areas, this play accounts for approximately 79% of its production in 2010.
Quicksilver Resources drilled 81.6 net wells here in 2010, and turned another 93.2 net wells to sales during the year. The company also purchased additional leasehold at the Lake Arlington area in 2010.
Quicksilver Resources also made progress in its New Ventures portfolio during 2010. The company has 130,000 net acres in the Horn River Basin in Canada. Quicksilver Resources has drilled six wells into the two separate formations and has four on production. These new wells helped the company grow production by 145% in the fourth quarter of 2010.
Apache Corporation (NYSE:APA) and EOG Resources (NYSE:EOG) are building a liquefied natural gas (LNG) facility on the west coast of Canada to accommodate some of the future production from the Horn River Basin.
Quicksilver Resources also finished drilling its first well into the Exshaw formation in the Horn River Basin. The Exshaw is an oil bearing formation that the company has been evaluating over the last year.
Quicksilver Resources also has 150,000 net acres in the Greater Green River Basin, where it is developing the Niobrara formation. The company plans to drill the first test wells here in the summer of 2011.
Quicksilver Resources has leasehold prospective for the Bakken formation in the Southern Alberta Basin and plans a test well here in 2011. The company is in no hurry to develop here as its acreage is held by production from an existing shallow oil play.
The Bakken is one of the more popular plays in the United States and has drawn billions in capital from the exploration and production industry. Continental Resources (NYSE:CLR) is a major player here and just increased its 2011 capital expenditures by $400 million, from $1.36 billion to $1.75 billion. Part of the proceeds will be deployed in the Bakken.
The Bottom Line
Quicksilver Resources has allocated enough capital in 2011 to develop its core properties in the Barnett Shale while keeping up its evaluation of several emerging plays in its portfolio. (For related reading, check out our Oil And Gas Industry Primer.)
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